Ford Said in Talks to Begin Building Lincoln Models in China – Bloomberg

Posted: Monday, June 06, 2016

Ford Motor Co., aiming to make China the top market for its Lincoln luxury line, is in talks with partner Changan Automobile Group about producing the brand’s vehicles in Chongqing, according to people with knowledge of the matter.

Ford is considering a major manufacturing presence in the southwestern Chinese city that would serve the domestic market and be an Asian export base, said one of the people, who asked not to be named revealing internal deliberations. Output could begin as soon as 2018 if Lincoln continues strong growth in China, where it got off to a fast start last year, the person said.

No agreement has been reached on key points such as profit sharing, and it may still take until 2020 or later for the first Lincolns to roll off the line in China, said another person, who said the discussions are preliminary.

“There’s no detailed plan at the moment” on producing the Lincoln brand in China, said Zhu Huarong, president of Chongqing Changan Automobile Co., Ford’s China partner, on the sidelines of a forum in the Chinese city Monday. In an e-mailed statement, Ford said that “Lincoln is selling imported vehicles in China and has nothing to announce regarding localized production.”

Ford Chief Executive Officer Mark Fields has said China could replace the U.S. as Lincoln’s largest market by the end of this decade. The company is investing $2.5 billion to overhaul the faded luxury line. Ford stopped making the Town Car, the long-lived business-travel stalwart that had become the symbol of Lincoln. Later this year, Lincoln will bring back the Continental nameplate on a broad-shouldered cruiser with an opulent back seat aimed at affluent Chinese customers who prefer to be chauffeured.

“It’s different in the U.S. than in China,” Kumar Galhotra, head of Lincoln, said of the brand’s standing in a January interview. “In China, our heritage plays very strong. Our favorable opinion in China is actually ahead of Lexus and on the factor of prestige, we’re actually ahead of Audi.”

In its first year in China, Lincoln sold more than 11,000 vehicles, which Fields has called the fastest start for a luxury-auto brand there “in recent history.”

Manufacturing in China would allow Ford to save on a 25 percent import tax, making its offerings more competitive in a premium market dominated by Germany’s Audi, BMW and Mercedes-Benz. Lincoln would join General Motors Co.’s Cadillac and Nissan Motor Co.’s Infiniti among luxury nameplates that are made in China.

The possibility of building Lincolns in China is made easier by the fact that the luxury cars are built on the same mechanical underpinnings as Ford models already produced there, said one of the people.

It’s not clear which Lincoln models Ford is considering building in China. The brand now sells four import models in China, according to its website. The MKZ sedan starts from the recommended price of 315,800 yuan ($48,000), or about the same as a China-produced Mercedes C-Class.

Redesigned SUV

Lincoln’s most expensive model in China, the Navigator sport utility vehicle, starts at 988,800 yuan, more than twice its U.S. price. A lavishly redesigned version of the Navigator, Lincoln’s most recognized nameplate in China, is due to arrive in showrooms next year.

Ford wants to boost the number of Lincoln stores in China to 60 by the end of this year, from 40 in March, at the time of the New York auto show, according to the company.

Ford on Monday also announced changes in its executive leadership in China that elevate the unit’s corporate-reporting structure. Dave Schoch, Ford Asia-Pacific chief, is taking over direct supervision of the automaker’s Chinese operations, adding the title of chairman and CEO of Ford China. Marin Burela, president of Changan Ford, is retiring Oct. 1, the company said.

Last year, Ford’s pretax profit in its Asia-Pacific region, where China is its largest market, rose 29 percent to $765 million. In this year’s first quarter, the company’s earnings in the region more than doubled to $220 million and its Chinese market share rose to 4.5 percent from 4.3 percent.

“As our growth plans in China have developed, this market is delivering an increasingly important portion of our revenue and profits globally,” Fields said in a statement. “Elevating the reporting of this business right now reflects China’s importance in our profitable growth plan going forward.”